Archive for April, 2015

For Ex Volatility

Posted: April 29, 2015 in Uncategorized

I got a nice chart from Blackrock of GDP weighted currency volatility since 1995.

Interestingly shows that Forex volatility as an end of day measure is quite high (circa 10), the only two recent events that surpassed that is the Russian-Asia Crisis (17) and Lehman Brothers in 2008 (12.5).

Moreover if the volatility is taken during the day (not as end of day) the  volatility is the same of Lehman.

The normal volatility range is between 2 and 5 since 1996.

All this while the volatility in the share and bond market is very low.

Since the currency market is the only market he the various Reserve Banks cannot manipulate this chart make it clear how manipulated is the market – and who the puppeteers are.

By default, it tells you that the reality is quite different.

Real Chinese GDP data

Posted: April 29, 2015 in Uncategorized

Every expert knows that the Chinese data on GDP are manipulated (released too soon after collection and too smooth).

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Finally someone with a brain tried to discern what could be the real data.

Citibank internal estimates comes in at 5.8%, but some other research houses – institutional only – have much worrying data.

Capital Economics at 4.9%pa

Conference Board’s China Center at 4%pa

Lombard Street Research at 3.8%pa

These research houses are the real “top research house” not the sell side research houses .

If you consider the Chinese rally in the market….it seems the the Chinese learned again for the US. If the economy do not grow….pump up the market!

Learn from the best…die like the rest (in a mega bubble..soon or later!)

Real Chinese GDP data

Posted: April 27, 2015 in Uncategorized

Every expert knows that the Chinese data on GDP are manipulated (they are released too soon after collection and too smooth).

Or simple maths..GDP growth 7%pa and Industrial Production at 5.6% (end March)…there is a missing 1.4% that is not accounted for.

Finally someone with a brain tried to discern what could be the real data.

Citibank internal estimates comes in at 5.8%, but some other research houses – institutional only – have much worrying data.

Capital Economics at 4.9%pa

Conference Board’s China Center at 4%pa

Lombard Street Research at 3.8%pa

These research houses are the real “top research house” not the sell side research houses .

If you consider the Chinese rally in the market….it seems the the Chinese learned again for the US. If the economy do not grow….pump up the market!

Learn from the best…die like the rest (in a mega bubble..soon or later!)

I was reading a nice article from State Street (SPDR) that analyses the the relationship between commodities, real estates. Interestingly scary.

Some hard data from 1995 to 2015 (figures are averaged between commodities exporters Australia, Norway, New Zealand, Canada) (Unit Price base)

Salary up from 100 to 170

productivity from 100 to 136

Now just Australia

From 1999

House price from  138.7 to 356.2

Household debt from 100.3 to 163.2

Bank Assets from 100.5 to 168.5 (not so strangely similar…as the bank gave us the money to buy the houses).

The RBA in December 2014 said that the debt level is 250% of GDP.

So by December 54% of the assets we have are in housing, and 21% in Superannuation and just 6% in shares.

But gets worst…due to the “hunt for yield” – 65% of the equity assets are invested in high yield bank stocks (which invest in…real estate). And Super will be similar.

I do agree with SPDR – we sold a lot of things that were easy to pick from the ground and send it overseas. With the income we competed with each other (helped by negative gearing) to buy properties and not investing in productive things (so please do not complain re Ford and Holden leaving Australia – it is our fault in loving real estate.

So now we have no diversification (all in real estate) and a government that struggles to make hard decisions.

Enjoy the rally till you can!

In the general media there is quite a conviction that Iran is supporting the Houthis.

In reality Iran is not engaged, simply “likes” anything that create an issue to the Saudis – so it just tries to create issues with minimal physical support.

Now an Iranian flotilla is going towards Yemen. It is not really an aggressive move as it is completely outpowered by the US/Saudi/Egyptian coalition.

It could be just a show of defiance, but it could be also a political move.

It could be similar to the aid flotilla sent by the Turks to Gaza – it tried to force the Israeli blockade and some persons got killed – and Israel got the blame and had to change its Gaza politics.

So an Iranian flotilla could be used to create an accident and stop the Saudi.

The book Game of Thrones start to be quite boring….

Today Australian core inflation data came at +0.6% matching estimates – and leaving space for a cut to interest rate ( property price bubble permitting).

The interesting thing is actually the data within the data,….and explains why you feel always poorer that such a meagre increase.

Non tradable inflation (local food and restaurant, utilities, rent…all that is domestic inflation) +2.6%

Tradable (imported clothing, televisions and white goods, cars – everything non Australian) -0.9%

Even in more detail

tertiary Education +5.9% (!!)

Domestic Holidays +3.5%

Fuel -12%

Fruit -8%

Yesterday Saudi Arabia stated that there was no end in sight to the Yemen Air Campaign as the mission was succesfull, but not accomplished (restoration of the previous king and retreat of Houthis forces).

Today Saudi Arabia announced – we won! And stopped the campaign – what happened?

I think that Saudi had to bow to international pressure.

The US was starting to be worried as Al Qaeda took great advantage of the not-so-precise Saudi air campaign (as it was not the US bombing no one in the West cared about the imprecision). Al Qaeda in Yemen is considered the strongest remaining Al Qaeda branch.

Also Iran must have pulled some strings as a few hours before the ceasefire, Iran announced that they were expecting a deal.

Probably they told the US – stop the Saudis or no nuclear agreement.

Real politic at his best.

The Saudi had to obey, but are still in full alert as they mobilized their best troops, the National Guard, to move close to the border- before they were  just the normal Saudi Land Forces

So on the ground we are back to the status quo – with the Houthis weakened, but still there. Actually if I was them I would try to entice the American by “taking care” of Al Qaeda in Yemen.

A Chinese bubble

Posted: April 21, 2015 in Uncategorized

The Chinese market is going up like a rocketship and another megabubble will form.

China cut the lending requirement freeing up over USD 200 billion to help the economy.

With crackdown on corruption and shadow banking, failing steel enterprises and crashing real estate developers (Kaisa Group Holding is one of the first big developers to go bust)…the only way to go is gearing in the stock market.

And so it creates another bubble…probably one of the biggest ever as Chinese like gambling.

The regulator knows, but seems not to be able to set the pace (they do not want to burst the bubble, but they do not want to rise too fast) and its confusion can be seen in its action.

Last week CSRC (the regulator) warned against betting in the stock market and at the same time introduced the short selling capability and tightening rules on margin lending.

In the week ending 10 April mainland investors opened accounts at the fastest ever (3.2 million new accounts on top of the 4 million in March).

And now China has cut the lending requirement freeing up 200 billion.

The are creating not a strong bull….but a raging mad cow!

Again a just created bubble will not explode for a while (unless some  other events trigger it), but this is again another “Black Swan Event” randomly released…..there are so many now that we would need a Ticonderoga class destroyer (the most sophisticated anti missile US Navy ship) to get them all

And directly from China a “say it all picture….I hope they are joking – I can’t read Chinese….it is scarily funny!Capture china

Greece keeps on making the small headlines….but the issue is bubbling along.

Somewhere between May and August there will be Judgment Day.

And the first showdown is the 11 May.

I have a negative view on this as the positions are not sustainable in the long term.

Syriza has been elected with the double mandate of improving the life standard of Greece (renegotiating the debt) and remaining in the Eurozone.

This two goals are not achievable at the same time. So probably there will be some barter between UE and Greece, but at the end Syriza will have to call or a referendum or an election.

Similarly Germany is a similar position.

Angela Merkel knows that it must keep Greece in Europe as all the wealth of his export economy is based on the European Union (and Greece could be start of a movement of European exit), but on the other side it has the mandate to limit the amount given to Greece.

So they will negotiate and barter, but there are only two ways out

1. A Grexit.

2. A technical default of Greece (meaning a Greece default that only the professionals will understand…for example making the Greek debt in perpetuity (AKA interest only)).

3. A political coup/ revolution (1967 Greece had a military coup d’etat which lasted till 1974 when it returned to democracy…so it is not that far fetched)

But the Greek economy is not sustainable in any case

News of today: the Central Greek Government is seizing the local municipalities assets otehrwise it would not be able to make the IMF European loans and the pensions/salaries!

Oil breakout?

Posted: April 17, 2015 in Uncategorized

I did some research. It is actually to early to call.

The pattern is that of broadening wedge which is pretty much a not too reliable signal. We need to see what happens at the base of USD55 (WTI)  to understand

Capture Oil